Where are we headed?Irvine home prices?

[Kenkoko]

Fortune11 provided a simple answer to a complicated, convoluted, highly manipulated methods involving money movements not just China, but around the globe. For me I like what fortune11 mentioned is that, can I see everyday around me that I can be somewhat certain that a melt down is imminent or much further down the road is, are we loosing jobs in this economy, are homes inventory all of a sudden swelled in level. I see none of those currently and into the short term future. Are buyers in the past 6 years bought have substantial skins in the game and most are well financed in Irvine. This is Irvine market that we put the laser focus on only. From what I see seller not rushing to sell and still lots of cashed purchased homes by foreigners still being use as a vacation home and sit empty for the most part of the year. Chinese money flight only guarantee further buy and hold without distress for sale. I don?t know and many don?t know what gonna happen 1-2 year from now.

I agree with most of your observations and have pretty much the same read on the current market as you do. I do not see any big imminent drop in price in Irvine.

But I do disagree with using inventory level as an indicator to where Irvine home prices are headed (subject of this thread)
Inventory level is lagging, in this case 3 months. At best it tells you where we are now.
If we were talking about another city where FCBs are not a major factor, I would agree with using inventory level as part of future forecast because things usually do not change quickly in the RE game. People in general do not just ditch their homes.

However, in an unique market like Irvine where FCBs are a major factor, Inventory level may change very abruptly if economy takes a sharp downturn in China. FCBs did not buy in Irvine to live here. Did not even buy here for appreciation or Cap rate gains. FCBs bought in Irvine because Irvine RE is very liquid and safe. A lot of Chinese buyers are cash buyers in Irvine but are leveraged heavily in their holdings in China. This is the most popular way of getting money out of China. When things get bad, people sell their winning liquid investments to stay afloat. If we have a big down turn in the Chinese economy, (they have already been downward spiraling since 2016) supply will increase from FCBs selling to cover their losses in China.

Of course this does not mean Irvine home prices are heading lower. Maybe demand will continue to increase even as FCB dwindles. US economy may continue to grow or maybe Irvine will become silicon valley of the south producing higher paying jobs to prop up Irvine RE.

 

[superbobbay]

Chinese economy is in a downward spiral. Shanghai index has drop more than 20% since beginning of the year. And more importantly, has drop below 2016 lowest point. They are in a bear market. Stock has dropped 45% since 2015.
I am not predicting doom for Irvine home prices but I do think we will see Chinese buying slow down in Irvine market soon.

china is losing the trade war

Trade war has not even begun ...

Now you should respond by saying ?but market looks ahead ?

Now w this logic try and explain how yuan devaluation will not help the exports and thereby lessen the hit from tariffs ?

But but ... er...  yuan going down means capital flight, no ?
So ... where is money going ? Safer havens ? Geez , I wonder what those safer havens are ? Surely it can?t those s__hole countries trump was talking about .

But then see the US stock markets - it is up so much , this must mean we are winning the trade war , no ?  Hmm ... maybe it has to do with the best earnings season is a decade , propelled by tax cuts ?

Ultimately system is very complicated . We and the media have he desire to reduce everything to ?x happened , must mean y ? . The point is , no one knows

The only good  leading data point , and one I keep coming back to , is what USC outlined before  ? inventory levels .  That will be the least unreliable (notice my phrasing) indicator of all .

sorry, phrasing.

china will lose the trade war

better?

Why do you think this? Most articles I read are pointing to China winning any trade war.

1) Chinese are used to a difficult life, so any hardship won't really affect them much. Americans won't put up with any hardship - they will vote for the opposing party if pushed too much.

2) Xi Jin Ping has absolute control and can withstand internal pressure. President Trump cannot lose too much of his base or else his re-election is in jeopardy. This is why China is specifically targeting tariffs against red state industries.

I would love to see China lose the trade war, but most articles point to Trump caving in first.

 

[usctrojancpa]

Fortune11 provided a simple answer to a complicated, convoluted, highly manipulated methods involving money movements not just China, but around the globe. For me I like what fortune11 mentioned is that, can I see everyday around me that I can be somewhat certain that a melt down is imminent or much further down the road is, are we loosing jobs in this economy, are homes inventory all of a sudden swelled in level. I see none of those currently and into the short term future. Are buyers in the past 6 years bought have substantial skins in the game and most are well financed in Irvine. This is Irvine market that we put the laser focus on only. From what I see seller not rushing to sell and still lots of cashed purchased homes by foreigners still being use as a vacation home and sit empty for the most part of the year. Chinese money flight only guarantee further buy and hold without distress for sale. I don?t know and many don?t know what gonna happen 1-2 year from now.

I agree with most of your observations and have pretty much the same read on the current market as you do. I do not see any big imminent drop in price in Irvine.

But I do disagree with using inventory level as an indicator to where Irvine home prices are headed (subject of this thread)
Inventory level is lagging, in this case 3 months. At best it tells you where we are now.
If we were talking about another city where FCBs are not a major factor, I would agree with using inventory level as part of future forecast because things usually do not change quickly in the RE game. People in general do not just ditch their homes.

However, in an unique market like Irvine where FCBs are a major factor, Inventory level may change very abruptly if economy takes a sharp downturn in China. FCBs did not buy in Irvine to live here. Did not even buy here for appreciation or Cap rate gains. FCBs bought in Irvine because Irvine RE is very liquid and safe. A lot of Chinese buyers are cash buyers in Irvine but are leveraged heavily in their holdings in China. This is the most popular way of getting money out of China. When things get bad, people sell their winning liquid investments to stay afloat. If we have a big down turn in the Chinese economy, (they have already been downward spiraling since 2016) supply will increase from FCBs selling to cover their losses in China.

Of course this does not mean Irvine home prices are heading lower. Maybe demand will continue to increase even as FCB dwindles. US economy may continue to grow or maybe Irvine will become silicon valley of the south producing higher paying jobs to prop up Irvine RE.

Inventory levels have historically been a good predictor of where prices are heading because they incorporate supply (# of listings on the market which is current) and demand (from the previous month).  That's why in 2013 when you saw the months of inventory drop to around 1 month of inventory prices began to surge and multiple offer situations were very common.  On the other hand back in 2008/2009 we saw inventory levels cross over 1,000 active listings which was over 5 months of supply and prices began to fall.  You can also use the trend in the months of supply (whether it's increasing or decreasing) and currently the months of supply has increased from a little over 2 months to about 2.70 months which indicates that price increasing are slowing/leveling off.

 

[Kenkoko]

Inventory levels have historically been a good predictor of where prices are heading because they incorporate supply (# of listings on the market which is current) and demand (from the previous month).  That's why in 2013 when you saw the months of inventory drop to around 1 month of inventory prices began to surge and multiple offer situations were very common.  On the other hand back in 2008/2009 we saw inventory levels cross over 1,000 active listings which was over 5 months of supply and prices began to fall.  You can also use the trend in the months of supply (whether it's increasing or decreasing) and currently the months of supply has increased from a little over 2 months to about 2.70 months which indicates that price increasing are slowing/leveling off.

Thank you USC for bringing some useful data. How far do you feel comfortable predicting the market in Irvine using 3 months inventory level?

The last US economy crash in 08 did not happen in a Chinese economy down cycle. Back in 2008/2009 Irvine has not yet become a minority dominant city.
I do not think a Chinese economy melt down alone is enough to torpedo Irvine home prices. But We now have 10 more years of FCBs buying Irvine RE. Irvine is now a minority dominant city. Foreign economy will have a bigger impact.
If China economy falls off a cliff AND US economy slows down, I would not be shocked to see inventory go up very quickly.  A 3 month inventory level check probably will not be enough to prevent catching a falling knife.
With the exception of my primary home, I have been hesitant to buy more RE in Irvine with a big China slowdown looming.

To bet on Irvine home prices going up in the next 5-10 years in spite of a Chinese slowdown is a bet on the continuing growth of the US economy and Irvine becoming silicon valley of the south. I am just not all that confident about either one.

 

[usctrojancpa]

Inventory levels have historically been a good predictor of where prices are heading because they incorporate supply (# of listings on the market which is current) and demand (from the previous month).  That's why in 2013 when you saw the months of inventory drop to around 1 month of inventory prices began to surge and multiple offer situations were very common.  On the other hand back in 2008/2009 we saw inventory levels cross over 1,000 active listings which was over 5 months of supply and prices began to fall.  You can also use the trend in the months of supply (whether it's increasing or decreasing) and currently the months of supply has increased from a little over 2 months to about 2.70 months which indicates that price increasing are slowing/leveling off.

Thank you USC for bringing some useful data. How far do you feel comfortable predicting the market in Irvine using 3 months inventory level?

The last US economy crash in 08 did not happen in a Chinese economy down cycle. Back in 2008/2009 Irvine has not yet become a minority dominant city.
I do not think a Chinese economy melt down alone is enough to torpedo Irvine home prices. But We now have 10 more years of FCBs buying Irvine RE. Irvine is now a minority dominant city. Foreign economy will have a bigger impact.
If China economy falls off a cliff AND US economy slows down, I would not be shocked to see inventory go up very quickly.  A 3 month inventory level check probably will not be enough to prevent catching a falling knife.
With the exception of my primary home, I have been hesitant to buy more RE in Irvine with a big China slowdown looming.

To bet on Irvine home prices going up in the next 5-10 years in spite of a Chinese slowdown is a bet on the continuing growth of the US economy and Irvine becoming silicon valley of the south. I am just not all that confident about either one.

Irvine inventory levels went under 3 months of supply in 2012 remaining that way through today and that's when prices began moving up (we had a double bottom in terms of prices...in 2009 and then in 2011 after we came off the gov't cheese homebuyer credit of $8k sugar rush).  Since early 2012, we have been between 1 month to 2.5 months of supply and over that time prices have steadily increased (we got an approx. 20% pop in prices in 2013 when we were around 1 month of inventory).  I personally thought that home prices would have been fall in 2018 but I was wrong, we are up 4-8% YTD.  Baring anything dramatic happening I'll predict that prices will be flattish or slightly up but take that with a grain of salt as that's my best guestimate at this point. 

The thing that Irvine has going for is that the non-Great Park build-out will be completed in the next 3-5 years (Orchard Hills, Portola Springs, and Eastwood).  Once that happens more and more potential new home buyers will be forced to enter the resale market.  Keep in mind that there are anywhere between 8 to 10% of active listings on MLS that are brand new homes.  New homes are the today's shadow inventory (like short sales and foreclosures were in 2009 to 2012).  If there were no new homes in Irvine today, prices would probably have been up another 5%+.  Mark my words, after the build-out of OH, EW, and PS Irvine home prices will go higher.  Besides all that, what other city in the US has a multi-billion dollar company that brands a city like The Irvine Company?  Forget the land that they own and the homes that Irvine Pacific will build, TIC has thousands and thousands of apartment units and millions and millions of retail/office/industrial square feet which they want top dollar rent for so they spend big bucks on advertising and marketing.  TIC basically has the same interest that every Irvine home owner has, keep the value of Irvine high.  Hell, from what some of my clients told me they heavily advertise in China.

 

[Kings]

Chinese economy is in a downward spiral. Shanghai index has drop more than 20% since beginning of the year. And more importantly, has drop below 2016 lowest point. They are in a bear market. Stock has dropped 45% since 2015.
I am not predicting doom for Irvine home prices but I do think we will see Chinese buying slow down in Irvine market soon.

china is losing the trade war

Trade war has not even begun ...

Now you should respond by saying ?but market looks ahead ?

Now w this logic try and explain how yuan devaluation will not help the exports and thereby lessen the hit from tariffs ?

But but ... er...  yuan going down means capital flight, no ?
So ... where is money going ? Safer havens ? Geez , I wonder what those safer havens are ? Surely it can?t those s__hole countries trump was talking about .

But then see the US stock markets - it is up so much , this must mean we are winning the trade war , no ?  Hmm ... maybe it has to do with the best earnings season is a decade , propelled by tax cuts ?

Ultimately system is very complicated . We and the media have he desire to reduce everything to ?x happened , must mean y ? . The point is , no one knows

The only good  leading data point , and one I keep coming back to , is what USC outlined before  ? inventory levels .  That will be the least unreliable (notice my phrasing) indicator of all .

sorry, phrasing.

china will lose the trade war

better?

Why do you think this? Most articles I read are pointing to China winning any trade war.

1) Chinese are used to a difficult life, so any hardship won't really affect them much. Americans won't put up with any hardship - they will vote for the opposing party if pushed too much.

2) Xi Jin Ping has absolute control and can withstand internal pressure. President Trump cannot lose too much of his base or else his re-election is in jeopardy. This is why China is specifically targeting tariffs against red state industries.

I would love to see China lose the trade war, but most articles point to Trump caving in first.

China Is Losing the Trade War With Trump
https://www.wsj.com/articles/china-is-losing-the-trade-war-with-trump-1532729725

Trump is winning the trade war because China has more to lose
http://thehill.com/opinion/finance/397447-trump-is-winning-the-trade-war-because-china-has-more-to-lose

Market moves suggest China will blink first in the trade war, but US political pressures hint otherwise, experts say
https://www.cnbc.com/2018/08/03/strategists-market-moves-suggest-china-could-blink-first-in-trade-war.html

1. the US has much more to gain by shifting trade previously with china to other countries than china does with other countries (see soybeans to EU)

2. the US economy is still growing despite trade war concerns for the better part of a year, while china's is contracting.  it's not just china vs. US, but who around the world believes will win in china vs. US.  china's government can support its own businesses for as long as it likes, but they care just as much about foreign optimism in their economy (though they may not outright show it).

3. trump is irrational in the traditional sense.  china has no idea what he will do and that makes him dangerous.

4. wealthy chinese looking to park their money outside china might slow in the US, but that just means they will look for new safe havens - especially in china's contracting economy.  the question is where is the next vancouver or sydney? i think we will find out soon

 

[fortune11]

Trump is irrational no doubt, but the one proven item so far from past behavior is that he is a horrible deal maker

US politicians have a few months / 1 year / election cycle horizon while China thinks in terms of decades . If you have studied negotiation as a course at any level in school , you know that this automatically gives one side a big advantage .

And pasting clickbait headlines doesn?t mean jack . The financial media doesn?t have a clue and if you invested based on what you read in the media , you would have sold everything in 2013 and gotten out , only to miss the gains that followed .

Coming back to China specifically ? now Brazil stands to benefit  from a US China trade war right ? Why is the stock market there down so much ? Why is their currency so much weaker ? Point is , there is no simple answer

Worrying about variables you have no idea about , or cannot control is not a smart way to invest .  All you can do is make an imperfect decision based on imperfect data and hope things  work out .

This is where personal finances play a big role ? if you are stretching just to buy a home you don?t like anyway , maybe there is option value in waiting

But if you are set to buy a home comfortably , then use the softness to negotiate a better deal

Next thing you know , maybe Xi also has a pee pee tape on trump and we give the farm away to China and trump ends up calling it a win , and his cult followers hail him as usual and life goes on .... has anyone in the financial media given a thought to that possibility

 

[eyephone]

The Tariifs are a big deal because things will potentially cost more. Which will hurt business and consumers. Further more, this may trigger a recession.

 

[fortune11]

The Tariifs are a big deal because things will potentially cost more. Which will hurt business and consumers. Further more, this may trigger a recession.

Hard to argue with any of your points , always a possibility  . My point was more related to general pronouncements that ?US is winning the trade war w China ?


Inflation is one of the biggest threat from trade war . I doubt it triggers a recession though given fed behavior now a lot different than of feds past .

 

[hamilton]

One thing to consider if there is ever a good time/reason for FCB to sell Irvine properties you will see it happen en masse.  Chinese people have total herd mentality when it comes to buying/selling things, whether its the the newest hippest coffee or even Irvine real estate.... When Irvine/Rowland Heights/etc became a known brand in china tons of FCBs poured money over without even ever visiting or seeing properties because all their Chinese friends were doing it.  The same goes with shit ever hits the fan you can bet they will all run for the exits as well... just look at the wild swings in the chinese stock market to see how the herd mentality works.

 

[Kenkoko]

One thing to consider if there is ever a good time/reason for FCB to sell Irvine properties you will see it happen en masse.  Chinese people have total herd mentality when it comes to buying/selling things, whether its the the newest hippest coffee or even Irvine real estate.... When Irvine/Rowland Heights/etc became a known brand in china tons of FCBs poured money over without even ever visiting or seeing properties because all their Chinese friends were doing it.  The same goes with shit ever hits the fan you can bet they will all run for the exits as well... just look at the wild swings in the chinese stock market to see how the herd mentality works.

Completely agree with this.
Which is why I think using a lagging 3 months inventory level would not be helpful if/when shit hits the fan.
We have over a decade of FCB bought properties that can hit the resale market when economy really tank in China.

 

[Funkie]

One thing to consider if there is ever a good time/reason for FCB to sell Irvine properties you will see it happen en masse.  Chinese people have total herd mentality when it comes to buying/selling things, whether its the the newest hippest coffee or even Irvine real estate.... When Irvine/Rowland Heights/etc became a known brand in china tons of FCBs poured money over without even ever visiting or seeing properties because all their Chinese friends were doing it.  The same goes with shit ever hits the fan you can bet they will all run for the exits as well... just look at the wild swings in the chinese stock market to see how the herd mentality works.

Completely agree with this.
Which is why I think using a lagging 3 months inventory level would not be helpful if/when shit hits the fan.
We have over a decade of FCB bought properties that can hit the resale market when economy really tank in China.

Why would any FCB cash out Irvine (where their investment is safe) when the economy tanks in China?  The very definition of FCB is the homes are purchased w/ cash, therefore, more immune to market ups and downs or employment status. 

If China tanks, more $$ would stay in the US, right?

 

[Kenkoko]

Irvine inventory levels went under 3 months of supply in 2012 remaining that way through today and that's when prices began moving up (we had a double bottom in terms of prices...in 2009 and then in 2011 after we came off the gov't cheese homebuyer credit of $8k sugar rush).  Since early 2012, we have been between 1 month to 2.5 months of supply and over that time prices have steadily increased (we got an approx. 20% pop in prices in 2013 when we were around 1 month of inventory).  I personally thought that home prices would have been fall in 2018 but I was wrong, we are up 4-8% YTD.  Baring anything dramatic happening I'll predict that prices will be flattish or slightly up but take that with a grain of salt as that's my best guestimate at this point. 

The thing that Irvine has going for is that the non-Great Park build-out will be completed in the next 3-5 years (Orchard Hills, Portola Springs, and Eastwood).  Once that happens more and more potential new home buyers will be forced to enter the resale market.  Keep in mind that there are anywhere between 8 to 10% of active listings on MLS that are brand new homes.  New homes are the today's shadow inventory (like short sales and foreclosures were in 2009 to 2012).  If there were no new homes in Irvine today, prices would probably have been up another 5%+.  Mark my words, after the build-out of OH, EW, and PS Irvine home prices will go higher.  Besides all that, what other city in the US has a multi-billion dollar company that brands a city like The Irvine Company?  Forget the land that they own and the homes that Irvine Pacific will build, TIC has thousands and thousands of apartment units and millions and millions of retail/office/industrial square feet which they want top dollar rent for so they spend big bucks on advertising and marketing.  TIC basically has the same interest that every Irvine home owner has, keep the value of Irvine high.  Hell, from what some of my clients told me they heavily advertise in China.

Thank you USC. Not everyone is willing to stick their neck out and make a prediction. Definitely appreciate your take.

The appreciation upside from here on out seems rather limited compared to the downside.

Not sure I can truly get behind the idea that TIC's ability to manipulate supply and boost demand is powerful enough to outdo Marco Economics and shield Irvine from doom scenarios.

 

[Kenkoko]

Why would any FCB cash out Irvine (where their investment is safe) when the economy tanks in China?  The very definition of FCB is the homes are purchased w/ cash, therefore, more immune to market ups and downs or employment status. 

If China tanks, more $$ would stay in the US, right?

Because while a lot of these homes in Irvine were bought with cash, the funds were raised from leveraging financial holdings in China. This is the most popular way for chinese buyers to get money out of China and put into safe heaven Irvine.
When their business/finances goes bad enough in China where their livelihood is at stake, it is very likely they will look to sell their investment in Irvine to stay afloat. Irvine RE investments has been a winner and is very liquid (Chinese Realtors ad almost always tout the liquidity in Irvine). Curse of the winner?

 

[irvinehomeowner]

I dunno, just from a common 99%er viewpoint, I don't think anything the US does will really affect China's economy because EVERYTHING is made in China.

FCBs (not just from China) tend to hold real estate despite trouble here or where they are from, when Irvine was "tanking", many kept their properties so that "flood" of low-priced homes never came to fruition. There were a few here or a few there but for the most part, the high middle end of Irvine real estate stayed intact.

And, unlike the past, where there were many non-FCBs who used creative financing, that number is fewer now and even then, when everyone kept predicting all those ninja mortgages would implode, they didn't due to government intervention... so who do you think will step in again if it looks like the roof is caving in?

Could it dip 20%? Doubtful. 10%? Possible. 5%? More likely.

And in the end, if you just hold, that 20% (if it even happens) goes back up pretty quickly.

So wait, and hope the home you want goes for less... or buy the home that you like and can afford now and stop worrying about timing.

#brokenrecord

 

[irvinebullhousing]

Why would any FCB cash out Irvine (where their investment is safe) when the economy tanks in China?  The very definition of FCB is the homes are purchased w/ cash, therefore, more immune to market ups and downs or employment status. 

If China tanks, more $$ would stay in the US, right?

Because while a lot of these homes in Irvine were bought with cash, the funds were raised from leveraging financial holdings in China. This is the most popular way for chinese buyers to get money out of China and put into safe heaven Irvine.
When their business/finances goes bad enough in China where their livelihood is at stake, it is very likely they will look to sell their investment in Irvine to stay afloat. Irvine RE investments has been a winner and is very liquid (Chinese Realtors ad almost always tout the liquidity in Irvine). Course of the winner?

Ever heard of China Ghost Cities. You may want to read up on this.

 

[Loco_local]

I dunno, just from a common 99%er viewpoint, I don't think anything the US does will really affect China's economy because EVERYTHING is made in China.

FCBs (not just from China) tend to hold real estate despite trouble here or where they are from, when Irvine was "tanking", many kept their properties so that "flood" of low-priced homes never came to fruition. There were a few here or a few there but for the most part, the high middle end of Irvine real estate stayed intact.

And, unlike the past, where there were many non-FCBs who used creative financing, that number is fewer now and even then, when everyone kept predicting all those ninja mortgages would implode, they didn't due to government intervention... so who do you think will step in again if it looks like the roof is caving in?

Could it dip 20%? Doubtful. 10%? Possible. 5%? More likely.

And in the end, if you just hold, that 20% (if it even happens) goes back up pretty quickly.

So wait, and hope the home you want goes for less... or buy the home that you like and can afford now and stop worrying about timing.

#brokenrecord

Doesn't it really depend on how much the new developments are investor owned versus owner occupied? If prices start dropping do investors really have an incentive to hang on?

 

[momopi]

Real estate in China does not enjoy the same level of ownership or protection as the US.  Back in 1980s China started selling 20 year leases on land for development.  When the lease was up in 2004 the local government asked for payment of 35% of the property's current value for a 40 year lease extension.

Currently the typical land lease is 40-70 years.  If the developer obtained residential development land lease of 70 years, but the lease was obtained 15 years ago, then the buyer is buying into 55 year lease.  As the years go by your property value goes down.  At the end of the lease the government may request funds for lease extension or simple take the property for redevelopment.  Also the property structure might not last 55 years.  My ex-fiance's father worked for a Taiwanese construction company building condos in Tianjin and, having stayed in one of the units, you can hear your neighbor's loud conversations over the wall.  Buyers might realistically expect ~30 year lifespan to the buildings.

In Japan where land is expensive, many properties were developed on (privately owned) leased land.  The land and building are treated as legally separate properties.  For lease terms shorter than 50 years it might follow the old lease law (ky?h? shakuchiken) where tenants enjoyed greater protection, vs lease of 50 years or more might follow the new limited lease law (teiki shakuchiken) where the tenant is not only expected to vacate at end of the lease, but may also be on the hook for cost of restoring the land to its original condition.

Let's say if you bought a flat in Japan with fixed term lease of 50 years on the land.  As the years go buy the above ground property might depreciate quickly.  Every month you may have to pay a land lease fee to the land owner, plus a "restoration fee" that goes toward the demolition fund.  At the end of the lease you're expected to vacate, and if the demolition fund is insufficient to cover the cost of demolishing the building, you're on the hook to pay the remaining amount.

In America we take for granted that most of our properties are purchased as freeholds, and our houses were built to last.  My friend's Indonesian mother in law came to visit and she was shocked that the home interior (cabinets, kitchen) are 50 years old and still in good working condition.  However with recent move toward "planned obsolescence" I don't expect the kitchen appliances made today to last that long.


================

Also, we're very Irvine-centric with our views on FCB's.  But the truth is that we're just a small slice of the pie.  In East Asia investors from nearby countries invest heavily in 2nd tier cities.  For example Korea is sandwiched between China and Japan and cities like Busan receives FCB's from both.  In Japan second tier cities like Osaka receives FCB's from Hong Kong, where the RE market is even more crazy than Tokyo or Seoul and investors consider Osaka to be a bargain.

With recent events in NK, investors are also pouring into border areas like Dandong in China and Paju in South Korea.  In Dandong it was reported that sellers were receiving up to 200 visitors/day with 60%-70% from outside the area.

 

[Kenkoko]

I dunno, just from a common 99%er viewpoint, I don't think anything the US does will really affect China's economy because EVERYTHING is made in China.

I do not think anything the US will do will affect China. However, China is already in a bear market, stocks are down almost 50% from 2015. If the trade war gets much much worse, can it be the last straw that breaks the camel's back?

FCBs (not just from China) tend to hold real estate despite trouble here or where they are from, when Irvine was "tanking", many kept their properties so that "flood" of low-priced homes never came to fruition. There were a few here or a few there but for the most part, the high middle end of Irvine real estate stayed intact.

And, unlike the past, where there were many non-FCBs who used creative financing, that number is fewer now and even then, when everyone kept predicting all those ninja mortgages would implode, they didn't due to government intervention... so who do you think will step in again if it looks like the roof is caving in?

IHO, We never had a mass Chinese FCB selloff in Irvine because this is the first big Chinese economic downturn since their economy took off in the 90s. If this Chinese downturn happened 10 years ago, I would be much less alarmed because they do not yet hold so many properties in Irvine.
Financing works differently in China. Taking out a home/business loan has personal guarantees. Defaulting on a loan there would mean wage garnishment, lien being put on your other financial holdings. This is why they have 2% mortgage rate. One cannot walk away from debts simply by walking away from the bad investment like here. When shit hits the fan in China, they will likely sell their Irvine home because these home were bought for rainy day emergencies.
[/quote]

Could it dip 20%? Doubtful. 10%? Possible. 5%? More likely.

And in the end, if you just hold, that 20% (if it even happens) goes back up pretty quickly.

If US economy continues to grow, we can definitely sustain a Chinese FCB selloff. But if US economy slows down and Chinese economy takes a nose dive,( they are already diving down lower) a mere 5% drop is overly optimistic to me.

So wait, and hope the home you want goes for less... or buy the home that you like and can afford now and stop worrying about timing.

This is only true IF you are in the market for your primary home. Even if you are in the market for your primary home now, the rental market makes so much more sense. Irvine rent is extremely low and there is not much unique homes you are missing out on in a cookie cutter city like Irvine.

 

[Mety]

One thing to consider if there is ever a good time/reason for FCB to sell Irvine properties you will see it happen en masse.  Chinese people have total herd mentality when it comes to buying/selling things, whether its the the newest hippest coffee or even Irvine real estate.... When Irvine/Rowland Heights/etc became a known brand in china tons of FCBs poured money over without even ever visiting or seeing properties because all their Chinese friends were doing it.  The same goes with shit ever hits the fan you can bet they will all run for the exits as well... just look at the wild swings in the chinese stock market to see how the herd mentality works.

Completely agree with this.
Which is why I think using a lagging 3 months inventory level would not be helpful if/when shit hits the fan.
We have over a decade of FCB bought properties that can hit the resale market when economy really tank in China.

This is a very interesting point.
So if FCBs decided to sell their US homes, would this hit Irvine hard?
I thought the majority of the buyers in Irvine are people living here with 20% or more downpayment. Even though there are good number of FCBs, I never thought they were the majority. Is this not true?